Word of mouth is a crucial factor in the success of many ventures, including the promotion of books, the sale of real estate, and the identification of job candidates. An appealing product or an interesting opportunity appears, and one person tells another, who tells another, who tells another. Such a series of personal referrals can quickly disseminate news about a product or an opportunity to a wide audience.
The Internet makes it possible for such personal referrals to reach a significantly wider audience. Unlike other communication media, the Internet presents no physical or financial barriers to personal referrals across vast distances. For example, the cost of sending electronic mail from New York to Boston is the same as the cost of sending electronic mail from New York to Tokyo. In contrast, sending postal mail or making a telephone call across the Pacific is significantly more expensive than doing so within the United States. And a face-to-face personal referral from New York to Tokyo obviously requires the purchase of a costly airplane ticket.
Although personal referrals via the Internet reach a wider audience than those made via other communication media, there are at least six fundamental limitations on the effectiveness of such referrals as a marketing method: (1) as a referral reaches each additional person, the continuation of the series depends on that person taking the initiative to contact someone else; (2) even if the series of referrals continues unabated, the marketer has no reliable means of identifying individuals who often make an above average number of referrals, or whose referrals often lead to successful outcomes for the marketer; (3) there is the possibility that an individual will receive the same referral from multiple parties, causing annoyance and ill will; (4) there is no way to control the manner in which each additional person in the series is contacted, i.e., the content and tone of the referral is left entirely to the individual; (5) after an offer has been modified, there is no way to prevent further referrals regarding the original version of the offer or to ensure that the latest version of the offer is always presented; and (6) after an offer has expired or has been withdrawn, there is no way to prevent further referrals regarding it.